For Apple’s share price to reach his target, however, the iPhone would have to sustain serious margin erosion.
“We haven’t seen that yet,” Zabitsky said, “We have seen a $30 per unit increase in the cost of the new iPad versus the iPad 2 and that’s a ding in margins. And that could take the stock down to about 10 times the consensus — right now that’s about $460.”
While Zabitsky said that price competition is not yet steep enough to hurt Apple as much as he predicts it will, it is possible as new products hit the market. Phones developed by Microsoft, for example, cost consumers nothing after rebate.
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Zabitsky has no relationships with companies in the industry.